Tribunal says China has no historic title over South China Sea

An arbitration court ruled on Tuesday that China has no historic title over the waters of the South China Sea and that it has breached the sovereign rights of the Philippines with its actions there, infuriating a defiant Beijing.

China, which has boycotted the hearings at the Permanent Court of Arbitration in The Hague, vowed again to ignore the ruling and said its armed forces would defend its sovereignty and maritime interests.

China's state-run Xinhua news agency said shortly before the ruling was announced that a Chinese civilian aircraft successfully carried out calibration tests on two new airports in the disputed Spratly Islands.

And China's Defence Ministry announced that a new guided missile destroyer was formally commissioned at a naval base on the southern island province of Hainan, which has responsibility for the South China Sea.

"China will respond with fury, certainly in terms of rhetoric and possibly through more aggressive actions at sea."

Photos from a rally over the dispute:

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Protesters throws flowers while chanting anti-Chinese slogans during a rally by different activist groups over the South China Sea disputes, along a bay in metro Manila, Philippines July 12, 2016. REUTERS/Romeo Ranoco

Protesters display placards during a rally by different activist groups over the South China Sea disputes, along a bay in metro Manila, Philippines July 12, 2016. REUTERS/Romeo Ranoco

Protesters display placards while marching as they chant anti-China slogans during a rally by different activist groups over the South China Sea disputes, along a bay in metro Manila, Philippines July 12, 2016. REUTERS/Romeo Ranoco

Demonstrators display a part of a fishing boat with anti-China protest signs during a rally by different activist groups over the South China Sea disputes, outside the Chinese Consulate in Makati City, Metro Manila, Philippines July 12, 2016. REUTERS/Erik De Castro

Activist and actress Mae Paner, with a replica of a dilapidated Sierra Madre ship of the Philippine Navy attached on her head, speaks outside the Chinese Consulate during a protest over the South China Sea disputes by different activist groups in Makati City, Metro Manila, July 12, 2016. REUTERS/Erik De Castro

A Philippine national flag flutters on a part of a fishing boat with anti-China protest signs, as demonstrators march towards the Chinese Consulate, over the South China Sea disputes, in Makati City, Metro Manila, Philippines July 12, 2016. REUTERS/Erik De Castro

Demonstrators chant anti-China slogans during a rally over the South China Sea disputes, outside the Chinese Consulate by different activist groups in Makati City, Metro Manila, Philippines July 12, 2016. REUTERS/Erik De Castro

Demonstrators display a part of a fishing boat with anti-China protest signs during a rally by different activist groups over the South China Sea disputes, outside the Chinese Consulate in Makati City, Metro Manila, Philippines July 12, 2016. REUTERS/Erik De Castrby

A demonstrator speaks during a protest over the South China Sea disputes outside the Chinese Consulate by members of the "Bayan" (Nationalist) activist group in Makati City, Metro Manila, Philippines July 11, 2016. REUTERS/Erik De Castro

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China claims most of the energy-rich waters through which about $5 trillion in ship-borne trade passes every year. Neighbors Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.

Finding for the Philippines on a number of issues, the panel said there was no legal basis for China to claim historic rights to resources within its so-called nine-dash line, which covers much of the South China Sea.

It said China had interfered with traditional Philippine fishing rights at Scarborough Shoal, one of the hundreds of reefs and shoals dotting the sea, and had breached the Philippines' sovereign rights by exploring for oil and gas near the Reed Bank, another feature in the region.

None of China's reefs and holdings in the Spratly Islands entitled it to a 200-mile exclusive economic zone, it added.

China's Foreign Ministry comprehensively rejected the ruling, saying its people had more than 2,000 years of history in the South China Sea, that its islands did have exclusive economic zones and that it had announced to the world its "dotted line" map in 1948.

"China's territorial sovereignty and maritime rights and interests in the South China Sea shall under no circumstances be affected by those awards. China opposes and will never accept any claim or action based on those awards," it said.

However, the ministry also repeated that China respected and upheld the freedom of navigation and overflight and that China was ready to keep resolving the disputes peacefully through talks with states directly concerned.

China's Defence Ministry said in a bilingual Chinese and English statement shortly before the ruling was made public that the armed forces would "firmly safeguard national sovereignty, security and maritime interests and rights, firmly uphold regional peace and stability, and deal with all kinds of threats and challenges".

The ruling also said China had caused permanent harm to the coral reef ecosystem in the Spratlys, charges China has always rejected.

The judges acknowledged China's refusal to participate, but said they sought to take account of China's position on the basis of its statements and diplomatic correspondence.

GROUND-BREAKING RULING

The ruling is significant as it is the first time that a legal challenge has been brought in the dispute, which covers some of the world's most promising oil and gas fields and vital fishing grounds.

It reflects the shifting balance of power in the 3.5 million sq km sea, where China has been expanding its presence by building artificial islands and dispatching patrol boats that keep Philippine fishing vessels away.

The United States and China often conduct military exercises in the area and regularly accuse each other of militarizing the region.

"Our experts are studying the award with the care and thoroughness that this significant arbitral outcome deserves," Philippine Foreign Affairs Secretary Perfecto Yasay told a news conference, reading from a prepared statement.

"We call on all those concerned to exercise restraint and sobriety. The Philippines strongly affirms its respect for this milestone decision as an important contribution to the ongoing efforts in addressing disputes in the South China Sea."

Japan said the ruling was legally binding and final.

U.S. diplomatic, military and intelligence officers said China's reaction to the court's decision would largely determine how other claimants, as well as the United States, respond.

If, for example, China accelerates or escalates its military activities in the disputed area, the U.S. and other nations would have little choice but to respond with new and possibly enlarged and multinational maritime freedom of navigation and aerial missions, the U.S. officials said, speaking on the condition of anonymity.

Contingency planning for such exercises was already completed or was in its final stages, said one of the officials, who quickly added: "We hope it doesn't come to that."

OIL PRICES JUMP

Oil prices jumped following the findings from The Hague, with international Brent crude futures up over a dollar, or more than 2 percent, to $47.29 per barrel at 0932 GMT.

The deep waters of the South China Basin between the Spratly and also-disputed Paracel Islands are the most direct shipping lane between northeast Asia's industrial hubs of China, Japan and South Korea and Europe and the Middle East.

The case, brought by the Philippines in 2013, hinged on the legal status of reefs, rocks and artificial islands in the Scarborough Shoal and Spratly Island group.

Manila's 15-point case asked the tribunal to rule on the status of the nine-dash line, a boundary that is the basis for its 69-year-old claim to roughly 85 percent of the South China Sea.

The court has no power of enforcement, but a victory for the Philippines could spur Taiwan, Vietnam, Malaysia and Brunei to file similar cases.

Ahead of the ruling, around 100 members of a Philippine nationalist group demonstrated outside the Chinese consulate in Manila on Tuesday, calling on Beijing to accept the decision and leave the Scarborough Shoal, a popular fishing zone off limits to Filipinos since 2012.

In China, social media users reacted with outrage at the ruling.

"It was ours in the past, is now and will remain so in the future," wrote one user on microblogging site Weibo. "Those who encroach on our China's territory will die no matter how far away they are."

Spreading fast on social media in the Philippines was the use of the term "Chexit" - the public's desire for Chinese vessels to leave the waters.

(Additional reporting by Enrico Dela Cruz and Martin Petty in Manila, Megha Rajagopalan in Beijing, Tim Kelly in Tokyo, John Walcott in Washington, and Greg Torode in Hong Kong.; Editing by Lincoln Feast and Nick Macfie)